Corporate Insolvency and Governance Act 2020—restrictions on ipso facto clauses
Corporate Insolvency and Governance Act 2020—restrictions on ipso facto clauses

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Corporate Insolvency and Governance Act 2020—restrictions on ipso facto clauses
  • Background to the Corporate Insolvency and Governance Act 2020 (CIGA 2020)
  • What are ipso facto clauses?
  • What was the position prior to the CIGA 2020?
  • What are the changes to ipso facto clauses?
  • What are the safeguards?
  • Key difference between IA 1986, ss 233A and 233B
  • Priority of supplies under section 233B where the company enters administration or liquidation following a Moratorium under IA 1986, Part A1
  • How might suppliers protect their position?

Background to the Corporate Insolvency and Governance Act 2020 (CIGA 2020)

Spurred on by the coronavirus (COVID-19) pandemic and a desire to mitigate the effect on businesses of the government-imposed lockdown, the Corporate Insolvency and Governance Bill received Royal Assent on 25 June 2020 resulting in the CIGA 2020. This followed the government’s previous consultation on proposed changes to the UK’s insolvency regime in 2016, its response to which was published on 26 August 2018 (see News Analysis: Exploring the government’s response to the insolvency and corporate governance consultation).

Among the reforms, the CIGA 2020 introduces new provisions into the Insolvency Act 1986 (IA 1986) to ensure the continuity of essential supplies and restrict contractual termination provisions on insolvency (so-called ‘ipso facto’ clauses).

For an overview of the CIGA 2020, see Corporate Insolvency and Governance Act 2020—overview and News Analysis: Corporate Insolvency and Governance Act 2020.

For more in depth analysis of the specific proposals, see:

  1. Practice Note: Corporate Insolvency and Governance Act 2020—restructuring plan provisions

  2. Practice Note: Corporate Insolvency and Governance Act 2020—moratorium

  3. Practice Note: Corporate Insolvency and Governance Act 2020—temporary changes to corporate statutory demands and winding-up petitions

  4. Practice Note: Corporate Insolvency and Governance Act 2020—temporary changes to the wrongful trading regime

  5. News Analysis: Corporate Insolvency and Governance Bill—company meetings and company filings

What are ipso facto clauses?

When a company is subject to an insolvency procedure, creditors

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